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Certified Trust and Financial Advisor Flashcards

7 cards from real Financial Advisor practice questions. Tap to flip, then mark Knew It or Still Learning — missed cards come back until you master them.

Read the first 7 Certified Trust and Financial Advisor flashcards as text

  1. A trustee is considering investing trust assets in a single stock that represents 40% of the portfolio. Which fiduciary duty is most at risk?

    Answer: Duty of prudence and diversification

    The Uniform Prudent Investor Act requires trustees to diversify trust investments unless special circumstances justify concentration.

  2. Under the Uniform Trust Code, which type of trust can be revoked or amended by the settlor at any time?

    Answer: Revocable living trust

    A revocable living trust allows the settlor to modify, amend, or revoke the trust during their lifetime.

  3. A CTFA candidate must understand that a 'spendthrift clause' in a trust primarily protects:

    Answer: Beneficiaries from their own creditors

    A spendthrift clause restricts a beneficiary's ability to transfer their interest and prevents creditors from reaching trust assets before distribution.

  4. Which generation-skipping transfer (GST) tax exemption amount applies per taxpayer in 2024?

    Answer: $13.61 million

    The GST tax exemption for 2024 is $13.61 million per taxpayer, indexed annually for inflation.

  5. When a trustee has a conflict of interest regarding a trust transaction, the most appropriate action is to:

    Answer: Obtain consent from all beneficiaries after full disclosure

    Full disclosure followed by informed consent from all beneficiaries is the proper way to handle a trustee conflict of interest.

  6. A Charitable Lead Annuity Trust (CLAT) provides income to:

    Answer: A charity for a fixed term, then the remainder to non-charitable beneficiaries

    In a CLAT, a fixed annuity is paid to a charitable organization for a specified term, after which remaining assets pass to non-charitable beneficiaries.

  7. Under the principal and income rules, which of the following is typically classified as trust principal rather than income?

    Answer: Proceeds from the sale of trust real estate

    Proceeds from selling trust assets are classified as principal, while recurring payments like dividends, rent, and interest are income.